What is the Most Accurate Credit Score?

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Whenever you apply for a loan or other type of credit, finance companies and banks check your credit score. In recent years, however, your credit is used for far more than just approval of a loan.

Your score is now used to determine everything from whether you’d be a good apartment tenant to whether you’d be a worthwhile employee – and having a bad credit rating can get you denied both a job and a place to live.

Unfortunately, the whole credit score subject can be confusing. There are multiple credit reporting companies, and often none of their scores are the same. Making things even more murky is the fact that there are multiple spectrums and ranges your credit is graded on.

Which is the most accurate credit score, and which one is most used by everyone checking your credit?

The Credit Scoring Systems

There are three major credit reporting agencies that handle personal credit: Experian, TransUnion, and Equifax. They use a score called the FICO, and it’s named after the Fair Isaac Corporation.

According to MyFICO.com, 90% of lenders use the FICO score when looking at a credit application, so it’s safe to say that if you’re managing your FICO score appropriately, you should have no problems when trying to get a loan.

Merchants, banks, credit card companies, student loans, and even some utility companies report your payment history and account status to the three credit bureaus. All of that data, as well as some other things like your address and sometimes employment history, comprises your credit report, which is what creditors look at when deciding whether to extend you credit.

The FICO range runs from 300-850, with 300 being the lowest possible score and 850 being the highest.

In order to even have a FICO score, you have to amass enough credit history for the agencies to grade it. In most cases, that means you need at least one account that’s been open for six months or more, and it needs to be reported to the credit bureaus within the last six months. The average credit score in America in 2016 was 673.

Any score under 600-620 is considered “subprime,” which is a fancy word for poor credit. Typically, people with a 620 score or below will find themselves paying much higher interest rates than someone with “prime” credit – over 700.

Another system is called VantageScore 3.0, and that one follows the 300-850 model as well. The VantageScore is a composite score from all three bureaus, and can score people with little to no credit.

Are All Scores the Same?

Because the three bureaus are technically competing with each other, they don’t always have the same data. A merchant may only report to TransUnion, for instance, which means your store credit card only shows up on a TransUnion report but not Equifax or Experian.

If you’ve recently paid off a loan or credit card, one bureau may show the payment faster than the others as well. These factors, as well as others, can result in a different score between bureaus. Usually, however, there is only a difference of +/- 20 points or so.

Which Provides the Most Accurate Credit Score?

The short answer is that there is no ‘most accurate’ score. While most lenders use FICO, making it the most popular scoring system by far, Credit Karma and other score trackers use the VantageScore.

Individual lenders also use their own scoring systems, which can result in an even more confusing landscape. Auto lenders, for instance, might not care about your late medical bills if you show that every auto loan you’ve ever had got paid off early.

How Can I Know Which Score to Use?

Oddly enough, having so many scoring models and individual lending criteria out there makes things easier for you; there’s no way for you to stay on top of all your scores and track all of the rating models so there’s no point in trying. What you can do, however, is use an app like Credit Karma, Credit Sesame, or other tracker to keep an eye on your VantageScore.

It will be close to your FICO score, and can still offer a pretty accurate idea of where your credit rating falls on the scale. Regardless of which score you pay attention to, if it’s fairly high, you won’t get any nasty surprises at the loan officer’s desk – even if he’s using another scoring model.

Author: Jeff Gitlen

Jeff Gitlen is a graduate of the University of Delaware. He writes about a wide range of financial topics including student loans, credit cards, small business financing, and more. His work has been featured on a number of sites including Bloomberg, CNBC, Forbes, Market Watch, and more.

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